On August 29, 2024, Bank of Russia Deputy Governor Alexey Zabotkin delivered a speech on the draft Monetary Policy Guidelines for 2025–2027. The document outlines the central bank's annual strategy for the upcoming three years.
"The goals and principles of monetary policy remain unchanged," stated Zabotkin. He emphasized that the primary function of the Bank of Russia is to protect and ensure the stability of the ruble by maintaining price stability, which supports a balanced and sustainably growing economy.
The Bank aims to keep inflation close to 4% and return it to this target if deviations occur. According to Zabotkin, "Our key tools to influence inflation are the key rate and communication about future monetary policy with explanations of the rationale behind our decisions."
Zabotkin noted that recent years have seen changes in how monetary policy impacts lending and demand due to factors such as the pandemic and sanctions. These changes are detailed in Appendix 1 of the Guidelines.
He also highlighted that an integral part of inflation targeting is a floating exchange rate, which allows for economic adjustments to external changes while enabling independent monetary policy.
Public confidence in the Bank's actions is crucial for effective inflation policies. This year’s Guidelines include a separate appendix outlining developments in communication policy, including more meetings with businesses and academia and active use of social networks.
Discussing economic conditions, Zabotkin remarked on strong domestic demand driving high economic growth in early 2024 but warned about resource shortages hindering further expansion. "Labour shortages significantly exacerbate these issues," he said.
Inflation is expected to exceed 4% by year-end due to demand outpacing production capacities. Consequently, "monetary policy should be more tight," requiring sustained tightness longer than previously anticipated.
The Baseline Scenario forecasts GDP growth slowing to 0.5–1.5% in 2025 due to moderated demand growth. The key rate is projected at an average of 14–16% for that year, with inflation returning to target by then.
Alternative scenarios include Disinflationary, Proinflationary, and Risk scenarios. The Disinflationary Scenario anticipates higher potential GDP growth driven by investments; Proinflationary assumes persistent high domestic demand leading to higher inflation; while Risk envisions a global financial crisis similar to 2007-2008 impacting Russian GDP negatively until recovery starts around late 2026 or early 2027.
Fiscal policy remains critical across all scenarios for sustainable macroeconomic stability. "A responsible monetary policy can restore price stability under any scenario," concluded Zabotkin.
---